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Monday, 27 July 2015

How to measure financial integration?

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

Speaker: Professor Jennifer Corbett, Australian National University
Chair: Robin McConnachie, Oxford Analytica

Though we know financial integration is deepening, we still know woefully little about how to measure or observe financial integration. In a seminar at PEFM in June, Professor Jennifer Corbett introduced a new research project that uses network analysis to try to address this gap and reveal patterns of financial interconnection.

The motivation for Corbett’s research is clear, given her focus on the East Asian economy and financial system. In the aftermath of the 1997 Asian financial crisis, many regional analysts concluded that the risks had stemmed from dependence on foreign intermediation. The policy prescription was thus to increase regional financial integration, especially in local currencies, with deeper, more tightly integrated markets seen as a driver of stability.

But, as Corbett pointed out in her presentation, the repercussions of tighter integration remain understudied. In part, this is because existing models of financial integration remain simplistic.

Wednesday, 8 July 2015

Truths, partial truths and myths: Inside the Irish ‘bailout’

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

Speaker: Patrick Honohan, Governor, Central Bank of Ireland
Chair: David Vines, Balliol College, University of Oxford

For a second year in a row, Ireland will be the fastest growing economy in Europe in 2015. Unemployment remains in the double digits and public debt is high at 115% of GDP, but the country’s recovery from its banking-cum-sovereign debt crisis in 2008 has been remarkable.

It was an honor for PEFM to host Patrick Honohan, Governor of the Central Bank of Ireland in May to hear the story of both the crisis and the ‘bailout’ from the inside.

The recovery package Ireland received from its international creditors remains contentious, its legacy hotly debated in Ireland and across Europe, since Ireland offers possible lessons for the contemporary Greek experience. Governor Honohan waded directly into the debate, structuring his remarks around the truths, partial truths and myths of the Irish bailout.

Did the government’s decision to guarantee Ireland’s banks cripple the Irish economy and directly lead to austerity?

In September 2008, the Irish government issued a broad state guarantee for all Irish banks for a year. The decision remains controversial, with critics claiming that the blanket bank guarantee was responsible plunging the country into recession as sovereign borrowing costs soared, ultimately prompting the international recovery programme and a harsh period of austerity.

Culture as the basis for trust: Rebuilding trust in banks

Alexandra Zeitz (Global Economic Governance Programme, University of Oxford)

Speaker: Peter Montagnon, Associate Director, Institute of Business Ethics
Chair:  Adam Bennett, St. Antony’s College, University of Oxford

Scandals continue to wrack the finance industry. On May 20, six banks were fined $5.6 billion over rigging of the foreign exchange markets. The need to address corporate culture in the finance sector seems clear.

The PEFM series has tackled culture and finance repeatedly over the past year. And the industry itself hasn’t been silent on the question of culture. Barclays, for instance, launched the ‘Transform’ programme to restore trust in the bank and place its values at the centre of its operations. 

But are attempts to reform culture genuine? And can they have an impact? In early May, PEFM hosted Peter Montagnon, Associate Director of the Institute for Business Ethics to discuss rebuilding trust in banks on the basis of cultural change. 

Montagnon’s core point was a simple but important one: culture must be understood as belonging at the heart of business, not a peripheral PR gloss. Culture, in the Institute for Business Ethics framework, is made up of core values, the ethics they imply, and the conduct that follows from those ethics. The values of a company set the tone for the behavior of all employees.